How to Achieve Freedom with Financial Planning in SG
Every working Singaporean wants to achieve financial freedom. If you plan your finances properly, it is possible.
Here at ValueChampion.sg, we cover a diverse range of financial products available in Singapore. In this article, we will explain what some of these products are and why they are so important for your personal financial planning.
Credit Cards
What are credit cards?
In Singapore, credit cards are generally plastic or metallic cards that you can use to buy goods and services from businesses that accept payment through them. When you use a credit card to pay for goods and services, you are borrowing money from the company or bank that issued you the card. You are expected to return this money, which may have interest or other conditions attached to it.
An example of a credit card in Singapore is the Citi Cash Back Card.
- Pros
- Great dining and groceries rewards
- High petrol discounts
- Cons
- Lacks shopping and entertainment rewards
- Not suitable for lower budgets
Why are credit cards important for financial planning?
One of the main benefits of using a credit card is being able to buy goods and services without being limited by the funds you have available. This allows you to make big-ticket purchases more easily. For example, you can buy a car with your credit card even if you don’t have the requisite amount of cash.
You can also redeem perks such as cashbacks, rewards, and airline miles when you make purchases using a credit card. For example, you can obtain up to 20.88% fuel savings at Esso & Shell if you spend at least SGD 800 a month using the Citi Cash Back Card. This card is one of the best credit cards in Singapore for cashback and rewards.
As Singapore moves towards being a “cashless society”, credit cards will only grow in importance.
What are the different types of credit cards in Singapore?
There is a wide variety of credit cards in Singapore. One way of classifying these cards is by the type of perks they are best for obtaining. For example:
- Credit cards for cashback - credit cards that give better cashbacks on purchases
- Credit cards for miles - credit cards that are better for accumulating frequent-flyer miles
- Credit cards for rewards - credit cards that are better for redeeming rewards through a rewards program
Loans
What are loans?
When you apply for a loan, you are applying for a sum of money that will be lent to you with the expectation that you will return the money. Depending on the lender, you might also have to pay interest or extra charges on top of the initial sum.
An example of a loan in Singapore is the OCBC FRANK Education Loan.
Why are loans important for financial planning?
Like credit cards, loans allow consumers to make large purchases they otherwise wouldn’t be able to make. For example, the OCBC FRANK Education Loan allows you to borrow up to SGD 150,000, or 10 times the monthly income of your guarantor, to fund your education. Taking such a loan can go a long way in enabling students from low-income families to pursue their studies. If you are cash-strapped during times of emergency, such when facing sudden medical illness, a personal loan can also help to cover your expenses.
What are the different types of loans in Singapore?
There are many different types of loans in Singapore. Some are geared towards a certain big-ticket purchase. For example:
- Car loans - loans to cover the cost of a car or Certificate of Entitlement (COE) renewal
- Home loans - loans to cover the purchase of a residential abode
- Education loans - loans to cover the cost of studying in an educational institution
Insurance
What is insurance?
Buying an insurance plan or policy is a way of protecting yourself if you incur unforeseen expenses. When you buy insurance from a company, the company agrees to provide you with a payout if you incur financial losses. These losses have to meet a certain set of criteria that the company determines.
An example of insurance in Singapore is the FWD Car Insurance policy.
- Third Party Damage Coverage
- S$5,000,000
- Workshop Type
- Authorised
- Coverage for Loss/Damage to Vehicle
- 100% of Market Value
Why is insurance important for financial planning?
Insurance provides a guarantee of compensation if you incur losses from unforeseen events. As we are unable to predict everything that will happen in the future, having insurance can afford us some peace of mind. For example, the FWD Car Insurance policy provides coverage for car-related accidental loss or damage.
What are the different types of insurance in Singapore?
Most types of insurance in Singapore are aligned to a specific need. For example:
- Car insurance - covers damages related to your car
- Home insurance - covers damages related to the structure of your home
- Health insurance - covers expenses incurred from illness and disease
Investments
What are investments?
When you buy an investment, it is with the expectation that its value will increase over time. This allows you to make a profit on the investment.
An example of an investment in Singapore is an Exchange Traded Fund (ETF), such as the SPDR STI ETF.
This ETF tracks the Straits Times Index, which in turn tracks the 30 largest companies on the Singapore Stock Exchange. You can buy ETFs like these through a brokerage in Singapore.
Why are investments important for financial planning?
Making investments can let you grow your wealth. When the rate of return on your investments is higher than the inflation rate, you prevent inflation from eroding the purchasing power of those investments. Your investment returns also have the potential to compound. This occurs when you reinvest the profits from the investment back into the said investment. This can increase your profits at an increasing rate over time.
For example, if you invested in the SPDR STI ETF, you can obtain a profit by receiving dividends or by selling your investment when the ETF’s market price increases.
What are the different types of investments in Singapore?
Some of the more common types of investments in Singapore are:
- Stocks
- Bonds
- Unit Trusts
- ETFs
Conclusion
With advances in financial technology, new financial products are coming to the fore everyday. This also means that new ways of obtaining financial freedom in Singapore are emerging.
We have only covered four different types of financial products in this article. We recommend that you browse our site further to gain a more in-depth understanding of the various products available.
Christopher is a licensed financial adviser and a General Insurance Broker with PolicyPal. He has nine years of experience in the insurance industry with various notable companies including Chubb, AVA, AIA, NTUC Income, and more. Today, Christopher helps to oversee the insurance content on ValueChampion and bring business growth to PolicyPal.